The SmartGrid is the Internet of Energy

The smart electrical grid has the potential to be the Internet of energy. It can be used to drastically reduce our use of imported oil, cut CO₂ emissions, and enable whole new industries, both by making energy more affordable and creating better markets for large and small energy producers.

So how come there are no SmartGrid success stories of innovation rewarded and spawning thousands of innovators? Where's the irrational exuberance? In fact, where's any exuberance? Most people yawn when they hear about the SmartGrid.

This is a marketing problem – and an imagination problem. Consumer lack of enthusiasm is understandable if the only benefits which are presented are benefits to the utility: avoid the cost of manual meter reading, better ability to deal with outages (sure, no one likes outages but we EXPECT utilities to deal with them), reduced peak demand. The closest SmartGrid marketing comes to a consumer benefit is "better ability to control your electricity cost"; trouble is that most of us spend much more on fossil fuels than we spend on electricity. In Vermont, only 16% of household energy is delivered as electricity; 53% is delivered as home heating fuel; 31% as gasoline for transportation (more detail here). We care about reducing our heating bill; we care about the cost of gas; we don't care nearly as much about the monthly electric bill.

Let's talk about reducing peak demand. Many SmartGrid projects give customers incentives to move away from peak use for the very good reason that, from a utility point of view, peak electricity is expensive to buy AND the grid and its energy supplies have to be sized for peak demand even if that peak lasts for less than an hour a day. On a good day, incremental peak electricity costs twice what electricity does when demand is low – and that's without factoring in all the additional capital costs for transmission.

Now let's think about the ski industry for a minute. They have a "peak" problem as well. People come to ski on weekends. A ski area needs to build capacity to serve a good holiday weekend. But it's very expensive to build lifts, hotel rooms, and trails just for the peak weekend. Do ski areas run ads saying "don't come ski on weekends, it's too congested"? Of course not; they run full week or midweek specials and advertise these to help use the capacity they had to build for weekends. Ski areas understand marketing – sell the benefit; utility executives, on the other hand, have been brought up in an environment where, because of political correctness, the only acceptable marketing campaign is to get people to use less of their product.

The right marketing approach for the SmartGrid, in my POV, is to sell the benefit of using MORE off peak electricity for home space and water heating and soon to charge electric cars. The economic result to the utility is the same as reducing peak use – a flatter demand curve and better usage of the facilities. But the benefit to the consumer is much more tangible – lower heating bills (even counting the extra electricity bought at off peak rates), lower transportation cost, less imported oil used, less CO₂ – whatever turns you on.

For business users of electricity, it is more important to ask "what opportunities will you have if you can use cheap off peak electrically delivered energy" than to keep harping on the possible savings from reducing peak use. Opportunities are more exciting than savings – especially for us businesspeople.

I'll be speaking on the opportunities to use the SmartGrid to displace fossil fuel both on Friday, October 1, at the Renewable Energy Vermont Conference in South Burlington and at a dinner open to the public put on by the Green Mountain Section of the IEEE on October 7 in Essex. The former has many renewable energy displays and talks (renewable energy needs the SmartGrid for distribution); the latter has an electric car display and test drive.